My New Favorite System

Aug. 12, 2024

Of course, this isn’t the first time I’ve said this.

Other systems have been my favorite.

At that time.

But I’ve been looking for something specific and important over the past several weeks, and I think I may have found it.

What am I looking for?

I’m looking for a sensible, foundational system that can be traded like people use index funds.

I want to be able to pour money into it without hesitation and watch it grow over time.

Furthermore, I want it to be a bedrock that could be the center of a bigger portfolio. For example, I’d like to have a system at the center and then possibly add other things (like maybe some “cheap” Futures systems).

So, what would a “foundational” system look like?

First, it would have to be completely understandable. For me, this means an index. I’m not sure I understand how Wheat trades and I may never understand it. But I do know how an index trades. And trillions of dollars trade hands every day in indexes.

And if I have to choose an index, I’d probably choose the ES (E-Mini Futures contract).

Second, it would have to have a lot of history of working in real life. For me, this means going back to one of my oldest friends: the RSI.

Third, it would have to be a “negative” reward-to-risk system. This is totally personal, but this is my favorite way to trade at the moment. What’s a negative reward-to-risk system? It’s one that has a target smaller than the stop. What are the advantages? High win rate and consistency.

Fourth, as mentioned, I would have to understand the losing and get excited to add more during a drawdown. Again, I don’t know if I’d love adding to a Lean Hogs system. I do think I’d be fine with an RSI/Negative R:R system drawing down. Drawdowns with systems like these show up when market is in a panic mode or in a manic mode. Those are easy to spot and easy to brush off. At least, they are for me.

Fifth, it would have to have tons of backtesting data. What has the most data? Cheap Futures and the ES. So the ES is okay (it goes back to the late 1990s).

Sixth, it would have to thrive when the market thrives. And I’d also like it to make more when the market is move volatile and is moving more.

Those things are what I’ve been looking for, and anything that fits that profile will be my favorite.

Have I found it?

Maybe.

Here’s the Curve of the system in question from 1997 to 2024 trading 1 contract each time (via Portfolio Architect):

We’re off to an intriguing start.

But there are problems with this system–like there are with any system.

And we’ll go over those and give away the details for free in our upcoming Newsletters the rest of the week.

Talk soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.